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Former Governor of Reserve Bank of India <keyword id="6358908" type="General" weightage="20" keywordseo="raghuram-rajan" source="Orion">Raghuram Rajan</keyword> has said he believes the country will be lucky if it achieves 5 per cent growth next year. The former governor also said next year is going to be more difficult than this one. "Of course, this one had a lot of difficulties with the war and all that. Growth is going to slow in the world. People are raising interest rates that bring down growth," he said. While talking with Congress leader <keyword id="5268" type="General" weightage="20" keywordseo="rahul-gandhi" source="Orion">Rahul Gandhi</keyword>, the former governor of the Reserve Bank of India said, "India is also going to be hit. India's interest rates have also gone up but Indian exports have been slowing quite a bit." "India's inflation problem is more about commodities inflation problem, vegetables' inflation problem. That is also going to be negative for the growth," he said on Wednesday in a candid talk with the Gandhi scion. The economist said, "I think we will be lucky if we do 5 per cent next year." The problem with the growth numbers is that you have to understand what you are measuring with respect to, he said. "We had a terrible quarter last year. And, you measure with respect to that you look very good. So ideally what you do is look before the pandemic in 2019 and look at now." He said, "If you look at 2022 vis-a-vis 2019, it's about 2 per cent a year. It's too low for us." While being asked what he attributes this to, by Rahul Gandhi, he said, "Pandemic was part of the problem but we were slowing before the pandemic. We had gone from 9 to 5. And, we haven't really generated reforms which will generate growth." Rahul Gandhi had asked him in the candid talk: "There is one thing happening, 4-5 persons are getting rich and they could go into any businesses and the rest of the people have remained backward. Farmers, the poor have formed a new Bharat. These 4-5 persons' dreams are fulfilled while those of the rest are dashed. What should we do with this inequality? "This is a big problem. This is not about industries," the economist said, adding, "The upper middle class have gained because they could work during the pandemic whereas the poor would have to go to factories and the factories were closed during the pandemic," he said. "This divide has grown during the pandemic," he said further. Economist Raghuram Rajan said, "The poorest could get ration. They get everything. These rich didn't suffer any difficulties. Those in between -- the lower middle class -- had to lose a lot. They lost their jobs. Joblessness went up. Debts went up. We should look at them. Because they have suffered a lot." On the subject of the concentration of wealth among the industrialists, he said we should also look at them. He said, "We couldn't be against capitalism. But we should be fighting for competition. We could be up against monopoly. Monopoly is not good for the country." He said India's issue was that our exports will also go down and growth would also decrease. "Technological support is needed, credit loans, there should be certainty about policies." He said there could be change. "If banks know that sales of small businesses are good and the steady revenue stream, they can lend but we need that information to be collected and made available. That is happening now. They are starting to think about all these in the fintech revolution right now. But in India, it needs to be 10 times," he added. Too many of our small companies don't grow big. They need a path to grow, he said. "Here is the problem, they get used to some of the benefits of staying small. If you don't pay taxes, officers won't come to them. They stay under the radar scan of the government instead of being helped by the government." He said, "You (company) stay under the radar until you get a revenue stream. Once your business grows, it should be like I'm going to look at you, I'm going to help you. I'm not going to tax you or make your life miserable. We need that situation." He added as soon as these businesses get better, the government take away those benefits. "There is no incentive to grow bigger. Why not say, if you grow bigger, you will get these incentives for five years? By the time they are big, they don't care," the economist added. 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Will be lucky if we grow 5% next year says former RBI governor Raghuram Rajan

Even as several non-BJP ruled states like Rajasthan, Chhattisgarh, Himachal Pradesh, Punjab and <keyword id="6360371" type="General" weightage="80" keywordseo="jharkhand" source="Orion">Jharkhand</keyword> have started implementing the old pension scheme, the Reserve Bank of India (<keyword id="30067" type="General" weightage="100" keywordseo="rbi" source="Orion">RBI</keyword>) has cautioned that it would add to the financial burden of the states. In its report titled "State Finances: A Study of Budgets of 2022-23", the central bank has said that the move is a major risk to the "subnational fiscal horizon" and may lead to the accumulation of unfunded liabilities in the years to come. "A major risk looming large on the subnational fiscal horizon is the likely reversion to the old pension scheme by some states. The annual saving in fiscal resources that this move entails is short-lived," the RBI report said. By postponing the current expenses to the future, the report said states risk the accumulation of unfunded pension liabilities in the coming years. The governments of Rajasthan, Chhattisgarh, Himachal Pradesh, Punjab and Jharkhand have informed the Centre about their decision to implement the old pension scheme, which they had promised to do in their election manifestos. The decision by these states has led to a political tussle between non-BJP and BJP-ruled states. Incidentally it was the BJP-led NDA government, which in 2004, had done away with the old pension scheme from April 1, 2004 onwards. In its place, the government had introduced the National Pension Scheme, (NPS), under which government employees contribute 10 per cent of their basic salary towards their pension while the government contributes 14 per cent. The private sector was also included under the NPS system. Under the old pension scheme, retired government employees received 50 per cent of their last drawn salary as monthly pension, and the amount kept increasing with the hike in the DA rates. The old pension regime is not fiscally sustainable as it is not contributory in nature and the burden on the exchequer keeps on mounting, experts have said. Even former RBI governor <keyword id="46742" type="General" weightage="50" keywordseo="d-subbarao" source="Orion">D Subbarao</keyword> had spoken about the negative effects of the old pension scheme recently. "In a country where the large majority of the people have no social safety net, government servants with an assured pension are a privileged lot. Privileging them even further at the cost of the larger public will be morally wrong and fiscally detrimental," he had said. Subbarao had cautioned that if state governments revert to a "pay as you go" pension scheme, the burden of pensions will fall on current revenues, which in turn means foregoing schools, hospitals, roads and irrigation. SEE ALSO: <a href="https://www.businessinsider.in/business/corporates/news/britannias-q4-net-profit-rises-47-yoy-to-559-crore-on-softer-input-costs/articleshow/100017366.cms">Britannia’s Q4 net profit rises 47% YoY to ₹559 crore on softer input costs</a> <a href="https://www.businessinsider.in/business/news/indigo-airlines-stock-to-surge-further-as-go-firsts-troubles-mount/articleshow/100009541.cms">The skies are clearer for IndiGo stock to surge further as Go First’s troubles mount</a> <a href="https://www.businessinsider.in/finance/banks/news/raghuram-rajan-speaks-out-on-zombie-companies-a-simmering-real-estate-time-bomb-more/slidelist/100014762.cms">Raghuram Rajan speaks out on zombie companies, a simmering real estate time bomb &amp; more</a>

RBI sounds note of caution on OPS, says it may add to liabilities in future

<ul><li><keyword id="6358908" type="DEFINITION" weightage="20" keywordseo="raghuram-rajan">Raghuram Rajan</keyword> has been named as a member of the International Monetary Fund Managing Director's External Advisory Group.</li><li>The external advisory group to provide perspectives from around the globe on key developments and policy issues.</li><li>This will include policy responses to the exceptional challenges the world now faces due to novel <keyword id="1754604" type="PERSON" weightage="20" keywordseo="coronavirus">coronavirus</keyword> and its economic impact. </li></ul>Former Reserve Bank of India Governor Raghuram Rajan has been named as a member of the International Monetary Fund Managing Director's External Advisory Group. Accordingly, Kristalina Georgieva, Managing Director of <keyword id="6355408" type="DEFINITION" weightage="20" keywordseo="imf">IMF</keyword>, convened the new external advisory group to provide perspectives from around the globe on key developments and policy issues, including policy responses to the exceptional challenges the world now faces due to novel coronavirus and its economic impact. "Even before the spread of Covid-19 and the dramatic health, economic, and financial disruptions it has brought, IMF members confronted a rapidly evolving world and complex policy issues," Georgieva was quoted as saying in a statement. "To serve our membership well in this context, we need top-notch input and expertise from the widest range of sources, inside and outside the Fund," she said. She further said: "Today we had a dynamic discussion to gain their insights, and to receive informal reactions to our ideas and approaches." Other members of the Managing Director's External Advisory Group include Ngozi Okonjo-Iweala, former Finance Minister of Nigeria, Tharman Shanmugar Atnam, Senior Minister of Singapore and Chairman of the Monetary Authority of Singapore, Kristin Forbes, Professor, Massachusetts Institute of Technology and Kevin Rudd, former Prime Minister of Australia amongst others.

Raghuram Rajan joins IMF chief's advisory group - will provide policy responses for coronavirus impact on economy

Mumbai, Jul 5 () Urjit Patel, whose stint as the head of the central bank was one of the most tumultuous in recent times that ended with the rare event of an RBI Governor resigning, will be releasing a book later this month, his publishers have said. Titled 'Overdraft: Saving the Indian Saver', the book focuses on the non-performing assets (NPAs) issue that has afflicted Indian banking in recent years, its causes and Patel's efforts as the RBI Governor in dealing with it. "Urjit Patel invests his thirty years of macroeconomic experience in building strategies to protect our banks from unscrupulous racketeers, ultimately aimed at saving our savings...," publisher HarperCollins India tweeted. Patel's book description says that sovereigns do not need to earn or save before spending money. They can either print or borrow. "…in our country, where they own banks, they can use our deposits to lend and splurge for goals that may not always be economic in nature. Many rulers have succumbed to the temptation, with dire results - inflation, debased currency, payments crises, bankrupt banks, economic stagnation, loss of public confidence. "After centuries of ruinous experiences, some governments learnt, others haven't, to control themselves, create self-governing Central banks and let them manage money and regulate banks," it says. The issue of unsustainable bad debts started as a trickle in 2015 and then became a "flood", it said. "In the forefront were some of India's largest government banks, and a series of tycoons who were running their empires on unpaid debts." Patel worked with a '9R' strategy which would protect depositors' savings, rescue the banks and protect them from "unscrupulous racketeers", it says. Books or memoirs written by two of his immediate predecessors -- Raghuram Rajan and D Subbarao -- had shed light on various subjects like the RBI's autonomy, interest rates or its stance on demonetisation. Patel, under whose governorship the note ban was carried out, surprised all by resigning from the RBI in December 2018. The resignation came at a time when relations between the government and the RBI had soured, with the former threatening to invoke a never-before used clause to give directions to the central bank. The RBI under Patel was reportedly averse to the government's wishes on getting extra capital held by the central bank, restructuring loans to small businesses and providing liquidity support to the troubled non-bank lenders. Patel's resignation was followed by a long period of absence from public gaze. However last month, in a surprise move, he was appointed as the chairman of the Ministry of Finance-run think-tank NIPFP. Deputy governor Viral Acharya, who gave a strong speech asserting RBI's autonomy and warned the government of the "wrath of markets", also quit ahead of the completion of his term. Patel was seen as very strict on the issue of NPAs and governance at banks, especially the private sector ones, where the RBI replaced the heads of ICICI Bank and Axis Bank, and started probing Yes Bank more closely. The RBI had begun a thorough asset quality review (AQR) to find out the hidden stress on banks' books when Patel was a deputy governor and he carried forward the same work. Patel's book will be released by the end of July, as per a book selling website. AA ABM ABM

Former RBI governor Patel pens book on dealing with NPA issue

<ul><li>Many of the working capital loans made to India's small entrepreneurs may be turning bad.</li><li>RBI Deputy Governor MK Jain raised an alarm in a speech yesterday but former governor Raghuram Rajan had already warned of 'credit risk' in September 2018.</li><li>Indian banks have given over ₹7 lakh crore worth loans under the Pradhan Mantri Mudra Yojana. </li><li>This will be added burden for Indian banks that are already saddled with bad loans worth over ₹9 lakh crore.</li></ul>Many of the working capital loans made to India's small entrepreneurs may be turning bad. MK Jain, the deputy governor of the Reserve Bank of India (RBI) raised an alarm in a speech yesterday but former governor Raghuram Rajan had already warned of the potential 'credit risk' in September 2018. In his report to the Lok Sabha (the lower house of Indian Parliament) Committee on Estimates in September 2018, Rajan highlighted that the "government should focus on sources of the next crisis, not just the last one. In particular, government should refrain from setting ambitious credit targets or waiving loans." At the end of March 2019, the total defaults since inception of the scheme was ₹17,650 crore (over $2.5 billion), roughly 2% of all the money lent under the programme. Rajan told you so... Rajan, who famously predicted the global financial crisis of 2008, specifically highlighted the rising quantum of contingent liability on account of Pradhan Mantri Mudra Yojana, which gives collateral-free loans to small entrepreneurs to meet their day-to-day business needs. A contingent liability is a possible future burden that cannot be quantified right now. In this case, banks giving these easy loans should have kept aside some money in case the borrowers become unable to repay the money. As it seems, the chickens have come home to roost. “The Mudra is a case in point-…while such a massive push would have lifted many beneficiaries out of poverty, there has been some concern at the growing level of non-performing assets among these borrowers,” the current RBI deputy governor Jain said on Tuesday (November 26). Over ₹7 lakh crore worth loans have been given under the Mudra scheme since its inception in 2015. Just as Rajan had warned, the amount of loans defaulted more than doubled in just one year, according to a <a href="https://www.business-standard.com/article/economy-policy/npas-under-modi-s-mudra-scheme-doubled-to-rs-9-204-cr-in-just-1-year-rti-119062400108_1.html" data-type="tilCustomLink" target="_blank">report</a> earlier this year. What's worse, another report showed that <a href="https://www.businesstoday.in/current/economy-politics/only-20-percent-mudra-loans-utilised-start-new-businesses/story/377353.html" data-type="tilCustomLink" target="_blank">only 20% of the money borrowed</a> went into starting a new business. Earlier this year, RBI had announced one-time restructuring of loan for small business owners who have borrowed less than ₹25 crore or if the loan default happened after January 1 of 2019. This has helped the MSMEs whose cash flows were adversely impacted due to transition under Goods and Services Tax (GST) and demonetisation. "Inefficiencies in lending practices, poor credit appraisal, willful default by borrowers and impaired cash flows due to slowdown also contribute to higher default rate," a Citi report this week said. Though the number of defaulters, and the amount of unpaid loans, is <a href="https://www.livemint.com/politics/policy/why-bad-loans-are-low-under-mudra-scheme-1563730565534.html" data-type="tilCustomLink" target="_blank">significantly lesser among smaller borrowers</a>, this is an added burden for Indian banks, particularly the state-owned ones, who are already saddled with unpaid loans to the tune of over ₹9 lakh crore at the end of March 2019. SEE ALSO: <a href="https://www.businessinsider.in/policy/economy/news/raghuram-rajan-gave-ideas-on-how-to-revive-economic-growth-in-india/articleshow/71573594.cms" data-type="tilCustomLink" target="_blank">Raghuram Rajan’s recipe to revive India's economic growth</a>

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Will be lucky if we grow 5% next year says former RBI governor Raghuram Rajan

ANI

RBI sounds note of caution on OPS, says it may add to liabilities in future

IANS

Raghuram Rajan joins IMF chief's advisory group - will provide policy responses for coronavirus impact on economy

IANS

Former RBI governor Patel pens book on dealing with NPA issue

PTI

Raghuram Rajan's warning about Mudra loans last year may be coming true— and now a Citi report confirms it

Sriram Iyer

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